1. Technical Field of the Invention
This invention relates generally to a system and method for debit card processing and more particularly to a system and method for processing of a merchant debit card program which includes a plurality of issuers.
2. Description of Related Art
A debit card is associated with a deposit account, such as a checking, savings, or other type of financial account. When a purchase is made with a debit card, the funds are deducted from the balance in the associated deposit account. Typically, the issuer of the debit card maintains the associated deposit account.
Different types of debit cards are currently offered in the marketplace. For example, two types of debit cards are an online debit card and an offline debit card. Online debit cards require electronic authorization of every transaction. The transaction may be additionally secured with a personal identification number or PIN authentication. Online debit transactions can be handled by regional ATM networks or by a national proprietary debit network such as the Interlink network operated by VISA Inc. When an online debit transaction is authenticated using the PIN, it offers the service of obtaining cash back from a merchant.
Offline debit cards are processed in a similar manner as a credit card. Offline debit transactions are processed through a proprietary card processing network such as VISANET operated by VISA Inc. in the same manner as credit card transactions. As such, offline debit cards are generally accepted worldwide at virtually all merchants that accept credit cards of the corresponding brand. Online debit card service and offline debit card services may be provided as features on the same debit card.
Debit cards have gained popularity with a shift from cash and checks to debit spending by many consumers. Merchants have offered co-branded credit cards in the past that also provide merchant loyalty reward programs. Due to their growing popularity, merchants are now seeking to offer co-branded debit cards that also provide merchant loyalty reward programs to customers. However, since debit cards must be associated with a deposit account, it is difficult for merchants to establish a national or international debit card program with a single issuer. If a customer does not have an existing banking relationship with the single issuer, the customer is reluctant to move an existing account or open a new account with the single issuer to obtain a merchant debit card. In addition, merchants generally fund the loyalty reward program themselves due to the lack of funding that an issuer typically shares on revenue from out-of-store purchases.
One current solution includes having a single issuer associate a merchant co-branded debit card with an existing customer account at another financial institution. When a purchase is made, the issuer then coordinates the withdrawal or debit of funds from the customer's account using an automated clearing house (ACH) network. However, there are severe disadvantages to an ACH network for debit card transactions. ACH processes large volumes of debit transactions which are originated in batches. The ACH network aggregates the ACH transactions by a customer each day and then withdraws the total amount of the ACH transactions from the associated debit account. The customer's deposit account thus only reflects a single, aggregated withdrawal and does not track each individual transaction. It is difficult then for a customer to dispute a single transaction or charge from their merchant debit card. This disadvantage presents regulatory issues as well.
Therefore, a need exists for an improved merchant debit card program that overcomes these disadvantages.